Canadian bank’s ‘unfair’ cannabis fees add to financial hurdles for lottery hopefuls

One of Canada’s top lenders is charging prospective cannabis business owners thousands of dollars for a routine review of financial documents, imposing an added cost on entrepreneurs who want to enter Ontario’s upcoming lottery for the right to open a marijuana retail store.

The Bank of Montreal (BMO) is charging potential clients 3,000 Canadian dollars ($2,300) for an “initial review” of operations and documents, according to documents viewed by Marijuana Business Daily.

There also is an annual charge of CA$1,000 for “monitoring and maintenance.”

Tax is not included, and no service is guaranteed.

“Payment of the fees does not entitle the client to any service,” according to the contract that BMO asks potential clients to sign.

The fees charged by the bank are anecdotal of the financial hurdles forced on prospective cannabis entrepreneurs in Ontario who want to join the regulated cannabis industry.

Ontario’s cannabis regulator will hold a draw Aug. 20 to belatedly add 42 new cannabis outlets to its roster of 25 authorizations.

Another eight locations will be divvied up between Ontario’s 133 First Nations communities.

Applications for the lottery will be accepted Aug. 7-9.

Ontario upped the requirements to join the lottery this time around and now asks for, among other things:

  • Confirmation from a bank for a commitment to provide a letter of credit for CA$50,000.
  • A bank letter confirming the applicant has the financial capacity to obtain CA$250,000 in cash or cash equivalents.
  • Evidence that an applicant has secured suitable retail space.

Lucas McCann, chief scientific officer at Toronto-based regulatory consulting firm CannDelta, said the bank is looking to pass on the administrative cost to its cannabis clients to perform risk analysis that likely would be done anyway if that same client was looking for another more common product, such as a mortgage.

“BMO charging a fee to produce documents for their clients in a legitimatized industry, I feel, is unfair,” McCann said.

“These cannabis retail clients are essentially forced to pay up or opt out of the Alcohol and Gaming Commission of Ontario (AGCO) lottery.”

The bank did not reply to multiple queries from MJBizDaily.

‘Why put us through this?’

One person, granted anonymity to speak freely, said BMO “completely changed the requirements” throughout the process, causing the applicant to miss the bank’s self-imposed deadline to process the paperwork.

After initially accepting the applicant’s “cash equivalents” for the letter confirming access to CA$250,000, the bank changed course and said the investments were not liquid enough.

BMO gave the prospective entrepreneur four hours to come up with CA$250,000 in cash to put into a corporate account.

“Due to BMO’s unrealistic deadlines, and requests to have a lease signed within 24 hours, we are now left with thousands of dollars out of our pocket, no letters signed, and a location we may not even be able to use in a lottery,” the applicant said.

“Why put us through this hassle with the banks?”

“The AGCO has made this process next to impossible for the smaller fish to apply.”

The applicant is still exploring his options to enter the store draw.

Few options 

One of the only other options for lottery hopefuls is Alterna Bank.

The Ottawa-based lender said it handled 24 of Ontario’s first 25 lottery winners.

The fees charged are considered more affordable than BMO’s but still come in at a hefty CA$1,000.

However, unlike BMO, Alterna says it screens potential clients before charging its fee.

The bank screens potential applicants “to let them know if there is a reasonable chance they can get services from us and make educated decisions as to whether it’s worth proceeding. We don’t want to put you through it, collect your money, then afterward say we couldn’t serve you,” Brian Lawson, Alterna senior vice president, told MJBizDaily.

Alterna handles banking services for about half of Canada’s federally licensed cannabis companies.

“We’ve got a good number of people doing basically this (the Ontario lottery) full time until probably the seventh of August, when the applications start going in,” he said.

Lawson said the bank has not determined its cutoff for accepting lottery applications, but he suspects it could be a few days before Aug. 7.

Alterna said it expects to process hundreds of applications.

Matt Lamers can be reached at [email protected]

4 comments on “Canadian bank’s ‘unfair’ cannabis fees add to financial hurdles for lottery hopefuls
  1. Maxcatski on

    Obviously, cannabis stigma has not disappeared even in Canada. Cannabis business is now legal and cannot be subject to special requirements.

    Screw the Bank of Montreal! If I was a customer, I would be calling them today to object to their shyster practices and to close my accounts.

    Cannabis rules in Canada. Get with the program, Mr. Banker. This is now business as usual.

    Reply
  2. Pamela on

    Adding more regulations & costs to new Cannabis Business entrepreneur’s inhibits growth, revenue & gov’t collectible tax dollars! Gov’t & Banks put more regulations in place as a more “money grab” Hey Canada! This is NOT How to grow businesses “No pun intended’. More power to the small Fish in the Cannabis Arena! ????

    Reply
  3. donald on

    TD Bank won’t sign the forms at all. Even if you have more than the required amounts sitting in a checking account at the bank, they will not sign the forms. They says its corporate policy not to deal with the cannabis industry. I guess they missed the memo that its legal now.

    Reply
    • Yolanda White on

      I feel so frustrated. I have my funds and retail space secured but TD wont give me the letter and Alterna is taking there extra long time.. I feel AGCO made it hust difficult for any average person to enter the lottery. I wish they had an alternative to provide a letter just statting I have funds instead of the letter they want. No bank is willing to fill it up.

      Reply

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